Hot Stock Sime Darby slides to near two-year low after poor 3Q results, lower KPI

by **Cals** Wed 27 May 2015, 19:30

Hot Stock
Sime Darby slides to near two-year low after poor 3Q results, lower KPI

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By Jeffrey Tan / theedgemarkets.com | May 27, 2015 : 4:26 PM MYT

KUALA LUMPUR (May 27): Apart from the recent battering on shares of [size=14]Tenaga Nasional Bhd ([You must be registered and logged in to see this image.] Financial Dashboard), another heavyweight Sime Darby Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) also took a beating following weak third quarter results that led to lower revision of its key performance indicator (KPI) targets.

Shares of the diversified conglomerate have so far retreated near to a two-year low of RM8.43 in early February last year. The selling on Sime Darby add pressure to the FBM KLCI, which has been drifting lower amidst cautious sentiment.

The stock has erased 7.62% in value year-to-date, tracking the weak benchmark index that fell 9.99% in the same period.

At 3.27pm today, Sime Darby (fundamental: 0.8; valuation: 0.4) lost 8 sen or 0.9% to RM8.49 on some 3.2 million shares done. It had earlier fallen to a low of RM8.47.

Analysts appeared coy on whether investors, in the short term, should accumulate the stock given its discount or dispose the shares to cut losses.

Public Investment Bank Research analyst Chong Hoe Leong told theedgemarkets.com that Sime Darby may not have bottomed off yet. “It can be cheaper,” he spoke over the telephone, noting it is currently trading at 20 times price earnings ratio.

A research analyst who declined to be named said her recommendation “depends on the coming quarter performances” of the group.

She expects Sime Darby’s plantation segment to continue to be disappointing given the lower crude palm oil (CPO) prices. Her forecast for CPO prices stood at RM2,200 per ton on average for the year.

But both analysts agreed that contributions from newly-acquired New Britain Palm Oil Ltd would help drive plantation earnings.

Over the long term of one to two years, Chong believes the group’s financial performance will bounce back and likewise its share price.

Last Friday, Sime Darby president and group chief executive Tan Sri Mohd Bakke Salleh announced the group is unlikely to meet its headline KPI target of RM2.5 billion net profit for the financial year ending June 30, 2015 (FY15) and a return on equity (ROE) of 8.5%.

The group is now hoping to close FY15 with a net profit of RM2 billion to RM2.1 billion instead, he told reporters after a briefing on the group's third quarter results.

Sime Darby (fundamental: 1; valuation: 1.1)'s net profit fell 55% to RM386.04 million in 3QFY15 from RM852.53 million a year earlier, while revenue was largely flat at RM10 billion from RM10.1 billion previously.

For the nine-month period, net profit was down 39% to RM1.32 billion from RM2.16 billion a year earlier; revenue contracted 1.7% to RM30.86 billion from RM31.39 billion in the same period.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)
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